Britain’s homeownership crisis: The 10 most unaffordable UK areas for first-time buyers
Don't Miss
Most Read
Trending on GB News
Almost all UK cities and towns are unaffordable for solo buyers on an average wage, and even couples are being priced out of 30 per cent of these areas, a new report has warned.
For aspiring solo homeowners, 96 per cent of cities and towns are unaffordable, based on the buyer needing to borrow beyond the 4.5 times mortgage-to-salary benchmark.
Bath is the most unaffordable city for solo first-time buyers, according to online mortgage broker Mojo Mortgages’ analysis of salary and property prices in the top 80 most populous UK cities and towns.
Solo buyers on an average wage would need to borrow 15.5 times their salary, to buy in the UNESCO World Heritage Site, while couples would need to borrow 7.7 times their income.
The average salary in Bath is £29,002, while the average house price and deposit is £530,349 and £79,552, respectively.
The City of London came in as second most unaffordable for first-time buyers, while Woking, a popular spot for those commuting into the capital, placed third.
Locations in southern England, where the housing market is particularly competitive, were predominant on the list of the most unaffordable places for first-time buyers.
Middlesborough was found to be the most affordable, with solo buyers needing to borrow 3.7 times their salary to buy in the area, on average. Couples would need to borrow 1.8 times their income, the report found.
Top 10 UK cities where mortgage affordability is a major barrier for first-time buyers
The cities are ranked in descending order of having the highest mortgage-to-salary ratio, and all far surpass the 4.5 times benchmark.
1. Bath
Average annual salary: £29,002
Average house price / average deposit*: £530,349 (£79,552)
Mortgage-to-salary ratio for one person: 15.54
Mortgage-to-salary ratio for two people: 7.77
2. City of London
Average annual salary: £60,000
Average house price / average deposit*: £1,083,917 (£162,588)
Mortgage-to-salary ratio for one person: 15.36
Mortgage-to-salary ratio for two people: 7.68
3. Woking
Average annual salary: £30,776
Average house price / average deposit*: £532,243 (£79,836)
Mortgage-to-salary ratio for one person: 14.70
Mortgage-to-salary ratio for two people: 7.35
4. Cambridge
Average annual salary: £34,821
Average house price / average deposit*: £592,375 (£88,856)
Mortgage-to-salary ratio for one person: 14.46
Mortgage-to-salary ratio for two people: 7.23
5. Watford
Average annual salary: £25,672
Average house price / average deposit*: £427,801 (£64,170)
Mortgage-to-salary ratio for one person: 14.16
Mortgage-to-salary ratio for two people: 7.08
6. Oxford
Average annual salary: £33,901
Average house price / average deposit*: £552,308 (£82,848)
Mortgage-to-salary ratio for one person: 13.85
Mortgage-to-salary ratio for two people: 6.92
7. Brighton
Average annual salary: £29,980
Average house price / average deposit*: £484,003 (£72,600)
Mortgage-to-salary ratio for one person: 13.72
Mortgage-to-salary ratio for two people: 6.86
8. Worthing
Average annual salary: £25,837
Average house price / average deposit*: £388,208 (£58,231)
Mortgage-to-salary ratio for one person: 12.77
Mortgage-to-salary ratio for two people: 6.39
9. Cheltenham
Average annual salary: £29,329
Average house price / average deposit*: £413,966 (£62,095)
Mortgage-to-salary ratio for one person: 12.00
Mortgage-to-salary ratio for two people: 6.00
10. Southend-on-Sea
Average annual salary: £24,534
Average house price / average deposit*: £335,551 (£50,333)
Mortgage-to-salary ratio for one person: 11.63
Mortgage-to-salary ratio for two people: 5.81
*Based on a 15 per cent deposit
What is the 4.5 times mortgage-to-salary ratio?
Many mortgage lenders use a 4.5 times mortgage-to-salary radio to determine the amount they’re willing to lend prospective homeowners.
For example, someone with an annual salary of £30,000 might be able to get a mortgage of £135,000, based on this guideline.
This mortgage-to-salary benchmark is intended to help ensure mortgage borrowers can comfortably manage their monthly mortgage payments, without falling into financial distress.
However, there are some strategies which could help a person secure a higher mortgage.
“Not all lenders strictly adhere to this 4.5 times benchmark,” Clare Flynn, Senior Mortgage Writer at Mojo Mortgages said.
“Depending on various factors such as loan amounts, credit scores, existing debts, your profession, and your overall financial situation, some lenders may offer more than 4.5 times your salary, while others may lend less.”
Top seven tips for boosting chances of borrowing more than 4.5 times benchmark:
- Improve your credit score
- Consider a joint borrower sole proprietor mortgage
- Minimise your debt-to-income ratio
- Explore shared ownership options
- Save a larger deposit
- Demonstrate stable income
- Speak to a free mortgage broker
For those worried about mortgage affordability, it’s important to remember there are options available - even for people on more modest salaries, Ms Flynn said.
She added: “With careful planning, expert advice and a can-do attitude, you may find that homeownership is more achievable than you initially thought.
“Don’t let fear hold you back - take that first step towards understanding your options by speaking to a free mortgage broker, and you might be pleasantly surprised by what’s possible.”
MORE FROM GBN MEMBERSHIP:
Top tips for getting a mortgage as a first-time buyer
The mortgage expert also shared six tips for helping first-time buyers secure a mortgage:
- Improve your credit score. According to Experian, an 'excellent' score (961-999) can unlock the best mortgage deals with lower interest rates. Even if your score is 'fair' (721-880), you can still secure a mortgage, albeit with slightly higher rates. Therefore, every point counts - so work on improving your credit score as soon as possible.
- Save as much as you can. The bigger the deposit you save, the better your mortgage prospects; not only does it reduce your borrowing amount (and, therefore, the overall interest paid) but it’s likely to open doors to better mortgage rates, too.
- Consider a joint application or a joint borrower sole proprietor mortgage to leverage multiple incomes, significantly improving your borrowing capacity
- Minimise your debt-to-income ratio by paying off existing debts where possible - this shows that you’re financially responsible and have more disposable income for mortgage repayments. Think of it as decluttering your finances.
- Explore shared ownership options. This scheme allows you to buy a share of a property while paying rent on the rest. It could help get a foot on the property ladder - especially in those areas where the average mortgage-to-salary ratio is high.
- Demonstrate stable income. Mortgage lenders want to see consistent income so ensure that you don’t change jobs whilst in the process of buying a house. Also, keep your payslips and other documentation in order as this makes it easier to be approved for a mortgage.
“These tips should make it easier to buy your first home but don’t be disheartened if some don’t apply to you,” Ms Flynn said. “Remember, everyone’s path to homeownership is unique.”